The Real Deal New York

Gotham Org sues Richard Born for breach of contract at Hell’s Kitchen mixed-use project

Company is asking for at least $4.5M in damages at 515 West 42nd Street
By Eddie Small | November 02, 2018 06:00PM

Richard Born (left) and Joel Picket (right) with 515 West 42nd Street (Credit: Studio Scrivo, Grid Properties, and Google Maps)

The Gotham Organization is suing hotelier Richard Born for an alleged breach of contract at 515 West 42nd Street, where the two companies were working on a mixed-use project.

Gotham Organization entered into a joint venture with RBA 42, LLC — an entity controlled by Born — in September 2016 to work on the project together, according to the lawsuit. Born’s company owned the site, and he had filed plans with the Department of Buildings earlier that year to build a 39-story mixed-use building there that would include 350 apartments across more than 277,000 square feet. The project would include 4,300 square feet of retail space on the ground floor as well.

Gotham was responsible for doing all the pre-development work under the agreement, which included securing a construction loan, the suit says. The company obtained one from Deutsche Bank that Born initially approved of even though it varied slightly from terms outlined in their agreement, only to then raise concerns about it nine months later, according to the complaint.

The loan requirements stipulated that RBA would not need to guarantee more than 20 percent of the principal loan amount, Gotham would be responsible for other guaranties, and neither party would have to make an equity investment of more than $12 million, the suit says.

After Born raised his concerns about the Deutsche Bank loan, Gotham tried to renegotiate the terms and look for loans from other providers, securing a new one from M&T Bank in late May. On the same day that Gotham showed this loan to RBA, RBA said it would terminate the agreement between the companies, the suit says.

Gotham argues in the suit that Born’s company had no reason to end their agreement and thus owes Gotham a breakup fee of $2 million, along with a reimbursement of all development fees and expenses Gotham incurred while working on the project over the preceding two years. The company is demanding at least $4.5 million in damages overall.

RBA has refused to reimburse Gotham or pay them a breakup fee, instead claiming that Gotham did not give it a “conforming loan” under the terms of their agreement, the suit says.

Gotham declined to comment on the lawsuit, and Born did not respond to a request for comment.